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BW Businessworld

Control Room Speaking

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Aviation is a tricky affair in India and it’s not easy to  find experienced CEOs to manage the business no matter which airline one runs. That’s why I was surprised at the sudden departure of SpiceJet CEO Neil Mills, who had been brought in by Kalanithi Maran after an extensive search, following the exit of Sanjay Aggarwal.
 
The timing of Mills’ exit also came as a surprise. As far as I can tell, things have been better for SpiceJet in the past two years compared to the earlier period when it lacked a clear owner as well as guidance and commitment from the board and staff. For years, the airline had seemed like an orphan, rudderless and with an uncertain future. 
 
The airline paid the price for that. During 2007-09, it went through one of its lowest points — its ownership changed hands several times, and its board was fractured. Its woes were reflected in its market share and operations. When Aggarwal took charge as CEO in October 2008, he found the airline in disarray and tried to infuse new energy. He set out to change things as soon as he took over.
 
But once Maran bought a majority stake in the carrier, things really started looking up. Maran’s steady stewardship and commitment (he raised his stake from 38 per cent to 52 per cent over a period of time through fresh investment) gave the airline clarity and direction like never before.

SpiceJet grew more in the past one and a half years than in the previous six years. Over the past two and a half years, it added 30 aircraft; in comparison, it had taken three years to go from 17 aircraft to 22.
 
Today, SpiceJet has 52 aircraft. The airline is leaner — 5,300 employees against 3,200 for 22 aircraft. And despite experts questioning its decision to fly to regional destinations with Bombardier Q400 (15 aircraft), the move seems to have paid off — at least for the time being — with the service contributing almost 11 per cent of revenues. This is expected to rise to 20 per cent in the next 12-18 months. The Bombardier has helped SpiceJet reach the most number of airports amongst carriers. It is, for instance, the only Indian carrier to fly from Riyadh to Guangzhou in South China profitably. 
 
SpiceJet has managed to keep its costs low by ensuring that all resources are shared, and reap the economies of scale (typically, the moment low-cost carriers add a new plane, things spin out of control due to increased costs). It is using the fleet better, has higher yields and a better and dense route mix. Sources says that SpiceJet has also been looking at a tie-up with a foreign airline and is already in talks.
 
That’s why the last thing the airline needed was a change at the helm. Of course, like all other airlines in India, SpiceJet, too, has been making losses for a while now — but that has more to do with the external environment in which airlines operate than with its own internal mismanagement. Unlike Kingfisher Airlines, which had been poorly managed for a long period, SpiceJet has, if anything, seen its best period in the past few years.
 
I also found the manner of removal of the CEO rather intriguing and less than transparent. It appeared that the decision had been taken at the whims and fancy of the airline’s chairman rather than by the board — which would be a more professional way to manage affairs. In fact, for some weeks after the news appeared in the media, it was not clear whether the CEO had been asked to leave. That’s not the ideal way for a public limited company to make an important announcement as the departure of its CEO.
 
Looking at this kind of a management style, one can be forgiven for wondering how these Indian carriers will fare in a truly global environment. Promoters need to stop treating companies like their personal fiefdoms where changes at the top are made more at their behest than as a collective decision in the best interests of the company. 
 
Unless that happens, I don’t see how the Indian aviation industry can claim to have come of age. 

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(This story was published in BW | Businessworld Issue Dated 09-09-2013)